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[Music] And that ties in really nicely to to the concept that we know everybody wants to hear about progressive exposure. Um, Mark, if you wouldn't mind going back to the MU trade, because this, I believe, would have been one of your first trades, first buy, coming out of the correction that we were in. Uh, could you kind of talk about your mindset, uh, when you're coming back into the market from 100% cash? We've been through a correction. What, what are you trying to do with your first few positions? How are you judging the traction of those positions to determine if you're going to increase size, try more trades? You know, all that, I think, would be really excellent.
Okay, so I'll start off with, I want to give you some guidelines on progressive exposure. Um, and then also, I'll let Mark and Brandon also come in on that, because they're really great at, at, uh, explaining that and and deploying it. So you have to think of progressive exposure on a couple of different levels. It's not just position sizing, it's exposure, it's total exposure. So, for instance, you're 25%, you come into the market with 20. Whether it's, let's say it's five stocks at 5% each, or one stock at 25%, both times you're 25% invested, right? One time theoretically, you have more risk because you have one stock, so you have single stock risk. Okay?
So now there's position sizing, there's that individual risk. So to where you progressively exposed, maybe I start off with 5% positions, but now as things get better, I move to 10, 15, and I move the position sizing up. And then there's your, there's your number of your actually number of stocks, which by default is going to happen. But actually, you would think as you're getting more exposed, you have more stocks. No, a lot of times it's just the opposite, where for me, I start off with some lighter positions, some smaller positions, and then I start concentrating as things get going well. Now I'm taking bigger positions, so I actually have less, uh, actual positions. So those are like your, and I don't know, Mark, did I, Brandon, did I leave anything out with progressive exposure?
A question. I'll jump with a question, sorry. And Brandon, feel free to elaborate on this. I think a common question people have is, are you selling those first smaller positions and then going back in with a bigger position on a new stock, or are you just adding to those first initial positions? I think that's, that's a good clarification question there. Mark, you want to take that as far as adding to a position and talking, I think, on its own two feet? Yeah, the Micron example is a perfect one. In the same way that you want to add to a position as it's working, is the same way you want to step up exposure in your overall portfolio. Uh, and to the, the specific question, Richard, though, are, do you have to take profits in order to, you know, buy another name? You can, but you don't have to. And I often, we often don't. We'll lean on those gains in the form of cushion, um, to say, okay, you know, we buy a name, it starts to move, we're going to lean on that, uh, a bit to take some more exposure. And that's the whole concept of feedback that we were talking about before, when I was saying, if you think of your own trading as, as the most important of, of echo chambers, if you will, that's what you want to stay in sync with.
One of the biggest mistakes people make is they go, well, and a question I get, what do you own? And how, how invested are you? Why is that as important as what do you own? And how's your trading going? What's going to drive my trading and my exposure is how the positions I'm in are doing. It's, it's not. And as Mark has often said, if you're 50% invested and it's going horrible, it doesn't make any sense to double up. That's how you get yourself into a disaster. Uh, you know, and the, the whole, you know, start with the end in mind. The whole goal of progressive exposure is to be trading your largest when things are really humming, when they're really working well. The only way you can do that is is to stay in sync with how things are going. So the goal to do really well in the market is to, is to get to whatever strategy you're using, is to develop a, a method or or a mechanism that you are trading your largest when you're trading your best, and your smallest when you're trading your worst. That is a huge, enormous statement that everybody should listen to over and over and over. Write it on the wall and live it every day as a goal, because that's how you, you make the big money in the good markets and you keep it all.
Right, so now there's a couple of things to talk about here. One is, and these are the questions Mark said, we lean, we're going to lean on those on those profits. Well, now there's open profits, right? And there's closed profits. Those are two completely different things. If you close a trade, well, that now that risk is out of the portfolio. Now you add a new trade, right? So let's equate it to the crap table, right? You've got a bet out there and you have a bet on the six, and and and you hit a six, you make some money. It's still out there. So you say, you know what, I'm doing pretty good. I'll take the eight now, and I'm going to buy the four and the 10. Now you've got more exposure, right? So now if they roll a seven, you lose on all those bets, right? So you're going to have, you have a much bigger drawdown. So now you didn't close those out yet. If you close them all out and then you put one bet, well, now you're financing that new risk. So you got to think closed versus open. If they're open, well, you got to watch those carefully because those open trades can move at the same time as those new trades. But if it's closed, you've got a little more leverage, a little more, you know, you have profit in the tank. It's going to be a combination of that. It's never going to be one or the other for very long. And and and it's at some point, you know, you've got to make a decision whether I've got the traction that I feel comfortable to push harder. And that's where we got to look at your, your worst-case scenario. We're always talking about our worst-case scenario. What is the worst-case scenario? If I get knocked out of everything here, what am I down? And that has to be managed. All this has to be managed.
So one thing is the, what I call the two for one rule. So you're in a stock, um, whether it's doing good or bad, let's just say it's doing bad, it's not doing very good, but it hasn't hit your stop yet. And you got, you got another stock that that's setting up, or you have a, you know, even a couple stocks that are not performing too well. So you want to, you want to participate, but you don't want to lever up because why would you add money? As Mark said, you're going to add money when things aren't working. So you sell half of the two positions and you buy a full position in the new stock. So now the stock that's looking the best at the time is getting the most money. The stocks that aren't doing too well are getting reduced, and you haven't raised your exposure at all. So that's one technique. There's a lot, lots of different techniques that we, that we use. They're just permutations. They're permutations of that concept.
Well, and I'll just add, you know, progressive exposure is, you know, one of these topics like we're going to talk about this forever, right? And Mark and myself are continuing to try to get better at this. And I think a lot of people get hung up on, well, I, I prog, I got more exposure on, I thought I was being progressive, and, you know, I, I did it wrong. I got stopped out. It's like, well, that happens. That's what's going to happen, right? And I think what Mark is saying too, as far as what is the risk factor that you are willing to take? And as for Mark and myself, as we're seeing the feedback, and this has taken a long time to to get good at this, as we get the feedback, we are willing to to take that risk number up. So if we're getting the feedback we want to see, we will increase the amount of risk we were willing to take. And I think a lot of people get hung up on that, and we have to be okay with that, that if we do up the risk and we get our hand slapped, that when we were wrong, that we're going to take that loss. And so, you know, I think a lot of people think like a progressive exposure, I should just do it when it's only working. It's like, well, it doesn't work every time.
Yeah, and and perfect. What you said was, um, you know, people get hung up on an on a specific answer. They want to know if I'm, if it goes to, you know, I take 25% and this stock goes up 10%, I add X percentage. It doesn't really work that way because it's just like poker. It's a texture of the game. You, you got to feel the text of the game. You're playing poker, and there's a guy on there that's a really good player. There's a couple of fish on the table, and you see how things are going, how aggressive the betting is, and you feel that. And there's an art to it. And there's the science of the pot odds and the actual percentage of the hand you have to know that that's the basics. But then there's that feel. There's the bluffing factor. There's the factor of, of, uh, of your stack size versus, you know, there's all these things. It's the same thing with trading. There's that's why it's beautiful. This is why this is a beautiful business. And and the reason why I want to point this out, the reason why there's this awesome opportunity is because it can't all be figured out into a spreadsheet. People want to put this into a spreadsheet, want to put it into a program. They think AI is going to put everybody out of business. It's nonsense. Absolutely ridiculous. Okay. This is an art. This is no different than you learning how to be a great baseball player. You can learn all about the physics and being the right angle and the in the box and have the bat in the right spot. But the bottom line is, you got to, you got to have experience. You have that experience. There's an art to it as well. Um, if it could all be put into a spreadsheet and everything could be figured out and some algorithm could just run it, guess what? No return. The market will be 100% efficient and random, and the random walk hypothesis would be right. But it's wrong. It's wrong because guys like myself, Brandon, Mark, David, Ryan, Jesse Livermore, Nicholas Darvis, you name it, they, David Ricardo, couldn't exist. William O'Neil, we couldn't exist. And it goes on every generation all the way back to the 1800s that there's people that outperformed the market. And the real thing is, it's not like Lotto. The names don't change. Stanley Drucker Miller has been doing it for 10 decades and decades and decades. I used to advise the Soros group. You know, these guys, I, I had a young guy that was, uh, that I advised back in the 1990s. He became a multi-billionaire, okay? Um, so, so, you know, the names don't change. Matter of fact, they, they seem to get where the guys that are good at this, they have long careers.
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